Sainsbury's revamp paying off

Monday 14 January 2002 00:00 BST

SUPERMARKET chain J Sainsbury met City forecasts for third-quarter sales growth, boasting a strong Christmas showing that it pinned on its turnaround drive.

Like-for-like sales including petrol rose 5% for the 12 weeks to 5 January, a slight slowdown from the 5.3% in the preceding three months. The fall in fuel prices has dampened sales growth across the industry but does not have a major impact on profits. Excluding petrol, growth was 6.4%, from 6% the second quarter. City forecasts had ranged from 4.7-7% including petrol, and 6-8% excluding petrol.

Sainsbury's was helped by a large number of refits in the run-up to Christmas, which it is undertaking as part of its recovery plan to catch up with market leader Tesco.

Chief executive Sir Peter Davis said the showing was a 'significant improvement' over the performance in Christmas 2000 and continued the revival in the business. 'We had a strong Christmas and New Year trading period, with our extended Christmas range selling well across the estate. Improved planning, better systems and the hard work of our colleagues delivered consistently high availability nationwide.'

The update comes a day after it emerged around 100 store manager jobs at the chain are under threat after the group initiated a sweeping performance review. Around one-fifth of bosses have been picked out for closer scrutiny as Sainsbury's steps up its three-year recovery plan under Davis. Sainsbury's hopes to save £150m this financial year and today said it was 'confident' of reaching this goal.

Davis said it was highly unlikely 100 store managers would go as a result of the review, which had been 'blown out of all proportion' by one of its rivals. 'This is something we have done from time to time to coax managers to perform better,' he said. 'Some will retire, some will be offered lesser jobs, running a smaller store and some may leave the company.'

Davis, who joined Sainsbury's in March 2000, said the firm was now 'running with the leaders' in the sector and had begun to take customers off Tesco for the first time in six to seven years. 'The significant thing is the industry had a pretty good year last Christmas and we didn't, indeed it was the last quarter we did not do very well. This year we have achieved 6.4% like-for-like growth so we have made a step change in our performance.'

Sainsbury's financial year ends in March and Davis said he was confident growth rates across the business could be maintained. Analysts forecast full-year pre-tax profits of more than £600m, from £434m in 2000-2001.